The decoupling of the US and China has only just begun

When a familiar and comfortable situation changes dramatically, the human instinct is to believe that things will soon get back to normal. The idea that life may have changed permanently is too unsettling to deal with. We are seeing this mentality with Covid-19. We are also witnessing it as business responds to the downward spiral in US-Chinese relations.

After 40 years of ever deeper economic integration between the US and China, it is hard to imagine a real severance of ties. Many executives believe that politicians in Washington and Beijing will patch up their differences when they realise the true implications of “decoupling” the world’s two largest economies. The hope is that a trade deal will stabilise things, even if it has to wait until after the US presidential election.

But that is too complacent. The reality is that decoupling has much further to go. It is already spreading beyond technology and into finance. In time, it will affect every large industry, from manufacturing to consumer goods. And all multinationals — even those based in Europe — will be affected, as they navigate disrupted supply chains and changes in American and Chinese law.

This process is being driven by a fundamental shift in the way both the US and China see their relationship. For the…

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